The interest imputation rules indirectly use a market rate of interest. What is meant by a market rate of interest?
> Payment of alimony by the taxpayer is a for AGI deduction. Which form can the taxpayer use to claim this benefit? Either 1040 or 1040A. 1040. 1040A. None of the above.
> Indicate whether each of the following items is considered a for AGI, (above-the line) deduction for the 2017 tax year. a. Student loan interest. b. Gambling losses. c. Early withdrawal penalty. d. Child support payments. e. Charitable contributions. f.
> For AGI, or above-the-line, deductions: a. Are determined by the taxpayer. b. Are set by statute. c. Increase tax liability. d. Are reported in Schedule A.
> Under current tax law, the deductible amount for expenses under the educator expense deduction is limited per taxpayer to: a. $100. b. $150. c. $200. d. $250.
> Which of the following items does not qualify as an educator expense item deduction? a. Books. b. Home schooling expenses. c. Computers and software. d. Professional development expenses related to the curriculum.
> At the beginning of June 2017, Julia left her husband and is currently living in an apartment. The couple has no children. At the end of the current year, no formal proceedings have occurred in relation to the separation or potential divorce. Julia has b
> The Renfros were granted a decree of divorce in 2016. In accordance with the decree, Josh Renfro is to pay his ex-wife $24,000 a year until their only child, Evelyn now 10, turns 18, and then the payments will decrease to $14,000 per year. For 2017, ho
> Mia is required under a 2016 divorce decree to pay $600 of alimony and $300 of child support per month for 12 years. In addition, Mia makes a voluntary payment of $100 per month. How much of each total monthly payment can Mia deduct in 2017? a. $100.
> Penalties for the early withdrawal of savings are reported by the financial institution on: a. Box 2 of Form 1099-INT. b. Form EWIP. c. A letter of notification. d. None of the above.
> Shana is a self-employed carpenter who had net earnings from self-employment of $3,500. She paid $325 per month for health insurance over the last year. Shana is entitled to a for AGI deduction for health insurance of: a. $0. b. $325. c. $3,500. d.
> As a for AGI deduction, self-employed health insurance premiums are deductible at: a. 50%. b. 70%. c. 80%. d. 100%.
> The deduction for half of the self-employment tax is: a. Based on a total of 7.65% of FICA taxes. b. Based on the gross earnings of the business. c. Based on filing status. d. Based on the net earnings of the business.
> Under the alimony recapture rules, what amounts are designated for recapture reclassification, and what are the tax consequences?
> To meet the distance test, the new job location must be: a. 100 miles from the old job location. b. At least 50 miles farther than the old residence was from the old job location. c. At least 50 miles farther than the new residence is from the old job l
> Deductible expenses for moving do not include: a. The cost of transporting household goods. b. Hotel costs while moving to the new location. c. Meals incurred during the move. d. Storage of household goods for a limited time upon arrival at the new loca
> To be eligible to deduct moving expenses, a taxpayer: a. Must meet the time test. b. Must meet the distance test. c. Must meet one of the change of job location, time, or distance tests. d. Must meet all three of the change of job location, time, and di
> To be eligible to fund a Health Savings Account (HSA), a taxpayer must meet which of the following criteria: a. An employee (or spouse) who works for an employer with a high deductible health plan. b. An uninsured employee who has purchased a high-deduc
> For 2017, the maximum aggregate annual contribution that a taxpayer, under age 55, can make to a Health Savings Account (HSA) for family coverage is: a. $1,300. b. $3,350. c. $6,750. d. $13,100.
> In 2013 through 2016, Korey, who is single, borrowed a total of $25,000 for higher education expenses on qualified education loans. In 2017, while still living at home and being claimed by his parents as a dependent, he began making payments on the loan
> Taxpayers eligible to take the student loan interest deduction do not include: a. A student who is claimed as a dependent on another’s return. b. A self-supporting student. c. The parents of a dependent student who took out the loan on their child’s beh
> Student loan interest is reported on Form: a. 1098-SA. b. 1098-E. c. 1099-S. d. 1098-GA.
> For AGI, or above-the-line, deductions: a. Increase AGI. b. Reduce tax credits. c. Are available only for MFJ. d. Can reduce overall tax liability.
> What is usually the largest miscellaneous deduction for individual taxpayers? Are any special reporting issues associated with it?
> Under the terms of a divorce decree executed May 1, 2017, Ahmed transferred a house worth $650,000 to his ex-wife, Farah, and was to make alimony payments of $3,000 per month. The property has a tax basis to Ahmed of $300,000. a. How much of this must b
> What happens to a charitable contribution that is in excess of the AGI limits?
> Donations to what types of organizations are tax deductible?
> What is investment interest expense? What are the limits to the deductibility of investment interest expense?
> When using the IRS sales tax deduction calculator to assist in determining a sales tax deduction, what information concerning the taxpayer do you need?
> If state or local income taxes are deducted as an itemized deduction on the current year’s tax return, what is required if the taxpayer receives a refund in the following year?
> For a tax to be deductible as an itemized deduction, what three tests are required?
> What are the four major categories of deductible taxes on individual returns?
> Can an individual take a medical deduction for a capital improvement to his or her personal residence? If so, how is it calculated?
> Describe the concept of a 7.5% floor for medical deductions.
> What are the six types of personal expenses that can be classified as itemized deductions on Schedule A, Form 1040?
> Chantel has received a 1099-INT from her financial institution showing $75 in box 2 of the form. How should she handle this on her 2017 tax return and why?
> What is the difference between deductions from AGI and deductions for AGI?
> Define alimony, child support, and property settlement.
> What is meant by a penalty on early withdrawal of savings, and under what circumstances is it deductible?
> Explain the two limitations associated with the deduction for health insurance by self-employed individuals.
> Explain why self-employed taxpayers generally pay double the amount of FICA taxes that regular wage earners do.
> A taxpayer incurs moving expenses in conjunction with a job-related move that meets the distance test. At the end of the year, the taxpayer has not yet met the time test. Under what circumstances can the taxpayer deduct the moving expenses?
> Describe the types of expenses that can be deducted for moving expenses.
> Explain the three tests associated with deductibility of moving expenses.
> What are the qualifications to be eligible for a Health Savings Account (HSA) deduction?
> Explain the limitations associated with the deductibility of student loan interest.
> Juan, who is single, is a self-employed carpenter and is also an employee of Frame It, Inc. His self-employment net income is $35,000, and he received a W-2 from Frame It for wages of $25,000. He is covered by his employer’s pension plan, but his emplo
> Who is eligible to take an above-the-line AGI deduction for educator expenses and what is the maximum amount of the permitted deduction?
> On July 1, 2017, Rene, a cash-basis taxpayer, purchased $500,000 of the newly issued bonds of Acce Corporation for $452,260. The 10-year bonds carry an interest rate of 8% and were sold to yield 9.5%. What amount of interest income must Rene report in
> Concerning the exemption for U.S. Savings Bond interest used for education expenses, what are the lower and upper income limitations for married taxpayers, and how is the exemption determined when taxpayer income falls between the limitation amounts?
> Why were the interest imputation rules created?
> A preparer tax identification number must be obtained by Only CPA’s, attorneys, and enrolled agents. Only individuals who are not CPA’s, attorneys or enrolled agents. Any individual who is paid to prepare a tax return. d. Only individuals who prepare
> A paid preparer must: Ignore a conflict of interest when representing a client before the IRS. Charge a contingent fee. Sign all tax returns he or she prepares. d. Provide records requested by the IRS in all circumstances.
> A paid preparer must not Cash a client’s IRS check. Charge a reasonable fee. Inform a client if the preparer makes a mistake on the client’s tax return. d. Provide a client with a copy of his or her return.
> Which of the following is (are) primary sources of tax authority? Statutory sources. Administrative sources. Judicial sources. All of the above.
> Which of the following trial court(s) hear tax cases? U.S. Tax Court. U.S. district courts. U.S. Court of Federal Claims. All of the above.
> Are the moving expenses of other people besides the taxpayer deductible and, if so, what are the requirements for deductibility?
> Which of the following refers to an income tax regulation? Reg. §1.162-5. Reg. §20.2032-1. Reg. §25.2503-4. Reg. §31.3301-1.
> Which of the following types of IRS Regulations have the greatest strength of authority? General or Final Regulations. Legislative Regulations. Proposed Regulations. Temporary Regulations.
> Which of the following is a statutory source of tax authority? Internal Revenue Code. Regulations. Revenue Rulings. Tax Court decision.
> A tax rate that decreases as the tax base increases is an example of what kind of tax rate structure? Progressive. Proportional Regressive. Recessive.
> Wanda and Austin are under the age of 65 and they file their tax return as married filing jointly. They had qualifying health coverage for three months during 2017. They were not eligible for an exemption. Their household income was $77,760. What is
> Benito is age 29 and single. During all of 2017, he did not have qualifying health coverage nor was he eligible for an exemption. His household income was $47,650. What is the amount of shared responsibility payment he must report on his 2017 income
> Arno and Bridgette are married and have combined W-2 income of $75,612. They paid $344 when they filed their taxes. How much income tax did their employers withhold during the year? $7,635. $7,291. $6,947. d. The answer cannot be determined with the
> Eddie, a single taxpayer, has W-2 income of $38,189. Using the tax tables, he has determined that his tax liability is: $5,283. $3,909. $3,700. d. $3,234.
> A married taxpayer has taxable income of $47,861. You have calculated tax liability using the tax tables and using the tax rate schedules. What can you say about the two figures? Tax liability determined using the tax tables will be more than tax liab
> Sandra, a single taxpayer, has taxable income of $79,238. Using the tax tables, she has determined that her tax liability is: $11.284. $14,059. $15,545. d. $15,625.
> Fabian, a single account executive, was employed and resided in New Mexico. On July 1, 2017, his company transferred him to Florida. Fabian worked full-time for the entire year. During 2017, he incurred and paid the following expenses related to the m
> Elizabeth determined that her tax liability was $3,492. Her employer withheld $3,942 from her paychecks during the year. Elizabeth’s tax return would show: a refund of $450. a refund of $3,492. tax due of $450. d. tax due of $3,942.
> On a Form 1040EZ, the amount of the permitted deduction from income for taxpayers filing a joint return is: $1,500. $10,400. $20,800. $31,200.
> Interest income is reported to a taxpayer on a Form: W-2. W-2-INT. 1099-G. d. 1099-INT.
> Wage income is reported to a taxpayer on a Form: W-2. 1099-G. 1099-W. d. 1099-INT.
> The most complex individual income tax return is a Form: 1040. 1040A. 1040C. d. 1040EZ.
> Which of the following would disqualify a taxpayer from filing Form 1040EZ? The taxpayer is married. The taxpayer is age 66. The taxpayer received unemployment compensation. The taxpayer had adjusted gross income (line 4 of Form 1040EZ) of $101,000.
> Jennifer and Paul, who file a joint return, have taxable income of $94,625 and the following tax liability: $18,650 × 10%....................................... =$ 1,865.00 ($75,900 − $18,650) × 15%.................. = $8,587.50 ($94,625 − $75,900) × 2
> Jennifer and Paul, who file a joint return, have taxable income of $94,625 and the following tax liability: $18,650 × 10%.............................. =$ 1,865.00 ($75,900 − $18,650) × 15%...........= $8,587.50 ($94,625 − $75,900) × 25%............=$
> Which of the following is an example of a progressive tax? Federal income tax. State and local taxes levied on property. Sales tax. d. Social Security tax.
> Which of the following is an example of a regressive tax? Federal income tax. State and local taxes levied on property. Sales tax. d. Social Security tax.
> If an employer contributes to an HSA on behalf of an employee, a. Is the contribution deductible by the employee? b. Is the payment considered income to the employee?
> Margaret earned $15,000 and paid $1,500 of income tax; Mike earned $50,000 and paid $5,000 of income tax. The tax rate structure they are subject to is: Progressive. Proportional. Regressive. d. Recessive.
> Jake earned $15,000 and paid $1,500 of income tax; Jill earned $40,000 and paid $3,500 of income tax. The tax rate structure they are subject to is: Progressive. Proportional. Regressive. Recessive.
> Cameron is single and has taxable income of $84,192. Determine his tax liability using the Tax Tables and using the Tax Rate Schedule. Why is there a difference between the two amounts?
> When taxpayers file a tax return, they will either pay an additional amount or receive a refund of excess taxes paid. Briefly explain how this “settling up” process works. Why might a taxpayer pay too much during the year?
> What six criteria must a taxpayer meet in order to file Form 1040EZ?
> What is the Income Tax Formula, in simplified form?
> Xavier and his wife Maria have total W-2 income of $91,932. They will file their tax return married filing jointly. They had a total of $10,149 withheld from their paychecks for federal income tax purposes. Using the tax tables, determine the amount o
> What is the amount of the permitted deduction for single and married taxpayers who use Form 1040EZ?
> Explain why unemployment compensation is taxable.
> What federal tax forms do taxpayers normally receive to inform them of the amount of wages and interest they earned during the year?
> Discuss the characteristics of an eligible educational institution as it relates to the deductibility of student loan interest.
> What is the definition of interest?
> What is meant by compensation for services? Give some examples.
> What type of tax rate structure is the U.S. federal income tax? Explain your answer.
> What is the definition of tax base, and how does it affect the amount of tax levied?
> Name the three types of tax rate structures and give an example of each.
> For tax year 2015 what proportion of individual income tax returns was filed on a Form 1040EZ, Form 1040A and Form 1040? What proportion was electronically filed?
> What is the most common way taxpayers pay their income tax liability during the year?
> Who must obtain a preparer tax identification number?
> IRS rules for paid tax preparers apply to what types of tax professionals?
> Define and compare these terms: average tax rate and marginal tax rate.
> Explain what is meant by regressive tax. Why the social security tax is considered a regressive tax?
